ASSET AND WEALTH MANAGEMENT
The first step in the company inclusion in the portfolio is the review of ESG (Environmental, social and governance) factors. ESG approach is more about leadership and paving the way, rather than compliance. Companies that lead are always the most respected in the long term, and I believe provide both a safe investment platform as well as peace of mind. The criteria used to examine the company's overall social responsibility theme are gender equality, employment and diversity, environmental stewardship, leadership values and community involvement.
The second step is to run potential candidate through qualitative screening process.
1. Invest only into companies that are dominant in a particular industry or sector.
2. Invest only into companies that are involved in an industry or sector that is a growing industry.
3. Invest only into companies that have strong pricing power due to the perceived quality or scarcity of the product or service being offered.
The third step is quantitative and fundamental analysis utilizing various research reports such as Reuters, Credit Suisse etc. A fundamental analysis is research on the firm’s financial statements, such as sales and profit growth trends, cash flow generation strength, debt levels and overall liquidity, and how this compares to the competition. No detail is too small in this section; it can also cover efficiency ratios like the turnover ratios and a detailed breakdown of return on equity components.
Very often a technical analysis is incorporated in ongoing portfolio monitoring in addition to utilizing target prices from various sources. The most important component of analyzing past trends is to synthesize it into a forecast of the company’s performance. No analyst has a crystal ball, but the best ones are able to accurately extrapolate past trends into the future, or decide which factors are the most important in defining success for a company going forward.